Chinese ADRs Tumble on Trump Order, Alibaba Plunges 10%: What's Next?

The U.S. stock market witnessed a significant selloff on Monday, February 25, 2025, as President Donald Trump's executive order targeting Chinese investments in strategic U.S. sectors sent shockwaves through the market. The order, which directs the Committee on Foreign Investment in the United States (CFIUS) to limit Chinese spending on technology and other strategic sectors, has sparked concerns about the future of U.S.-China trade relations and the performance of Chinese ADRs.

Alibaba Group Holding Ltd. (BABA) was one of the hardest-hit companies, with its American depositary receipts (ADRs) closing down 10% in U.S. trading, marking the biggest decline since October 2022. The Nasdaq Golden Dragon China Index tumbled 5.2%, with Bilibili Inc. and JD.com Inc. among stocks that slid more than 7%. The selloff marks a sharp reversal after a run-up in Alibaba and other China technology stocks in recent weeks, driven by optimism about artificial intelligence in the wake of DeepSeek. Alibaba had gained about 70% this year through Friday's close, while the Nasdaq Golden Dragon China Index rose 18%.



The order has increased geopolitical risks and volatility in the market, as seen in the recent selloff of Chinese ADRs, including Alibaba. On February 25, 2025, Alibaba's ADRs tumbled 10% in U.S. trading, marking the biggest decline since October 2022, following Trump's latest executive order. This volatility may continue to impact the performance of Chinese ADRs in the long term.

Trump's executive order targeting Chinese investments in strategic U.S. sectors has significant long-term implications for the performance of Chinese ADRs, particularly for tech giants like Alibaba. The order could limit Chinese companies' access to U.S. capital markets, damage their reputation and trust in the eyes of U.S. investors, and accelerate technological decoupling between the U.S. and China. However, Alibaba's planned $53 billion investment in AI infrastructure over the next three years could help mitigate these risks by demonstrating the company's commitment to technological independence and self-reliance.

As investors navigate the changing geopolitical landscape and supply chain strategies, they should consider the intersection of natural security with ESG, Sustainability, and Climate. This could lead to a greater focus on ESG factors in the long-term performance of Chinese ADRs, including Alibaba.

In conclusion, the recent selloff in Chinese ADRs, led by Alibaba, reflects investors' changing perceptions of geopolitical risks and trade dynamics between the U.S. and China. Trump's executive order targeting Chinese investments in strategic U.S. sectors has significant long-term implications for the performance of Chinese ADRs, particularly for tech giants like Alibaba. However, Alibaba's planned $53 billion investment in AI infrastructure could help mitigate these risks and maintain the company's competitive position in the global tech landscape.